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Closing the Canada-US Price Gap: Will We Really Pay Less?

As Canadians we have a reputation for our good manners – we’re known for our politeness worldwide. But when it comes to country price discrimination, we’re fed up! Canadians are sick and tired of paying higher prices than Americans.

With a federal election in 2015, the Conservatives have promised to take a closer look at the Canada-U.S. price gap. The Tories are fulfilling an election promise to help put an end to so-called country price discrimination. This isn’t the first time the government has looked into the matter, but it’s the first-time it’s promising to take action.

Tories Table Bill to Close Price Gap

Before the House of Commons went on holiday break, the Conservatives tabled legislation for new powers for the Competition Bureau to look into suspected cases of price gouging. It’s the Tories’ hope this will help put an end to unfair pricing gaps for same products between Canada and the U.S.

Canadians have been griping about paying higher prices for the same items for years (and rightfully so). We pay more for many products north of the border, including cars, electronics and magazines. Industry Minister James Moore referred to it as “geographic price discrimination”, and vowed to put an end to it. While higher taxes and tariffs are to blame, many Canadians believe retailers are charging them more because they can get away with it.

New Scrutiny for Retailers

Under the new bill the commissioner of competition will be able to investigate cases of price discrimination and obtain court orders to force businesses to provide tangible proof justifying the price gap.

However, while this all sounds good on paper, it will be difficult for the Conservatives to police price discrimination. The government will have to go on a hiring spree in order to look into every link a company’s supply chain. Also, with more Canadians shopping on the Internet, its impact could be minimal.

Criticism for Black Friday and Cyber Monday

Despite Thanksgiving taking place mid-October, many retailers have brought the Black Friday and Cyber Monday shopping craze to Canada. Although Black Friday and Cyber Monday spending was up this year, a lot of Canadians felt the deals fell short of the rock-bottom prices enjoyed by our American counterparts. Country pricing, where retailers charge different prices in countries, could be to blame.

Higher Tariffs on the Way

Despite the federal government’s promise to close the Canada-U.S. price gap, higher prices could soon be on the way. The Conservatives are raising tariffs on a wide range of products in the new year. This completely flies in the face of the Tories’ promise to stop price discrimination. The new tariffs are expected to bring in an additional $300 to $350 million for the federal government. Consumers are likely to foot the bill in the form of higher prices. With the federal surplus shrinking because of falling tax revenues from oil, the government isn’t likely to back away from higher tariffs.

The Fallout of a Lower Loonie

The issue of price discrimination really came to the forefront when the Canadian and U.S. dollars were near parity. Canadians simply couldn’t understand why the exact same goods in Canada were more expensive than the U.S. Canadians were even being charged more than Americans for products made in Canada!

How times have changed. The Canadian Dollar hasn’t been flying high as of late. Falling oil prices has caused the loonie to fall below 90 cents U.S. Not surprisingly, the lower loonie has made cross-border shopping less attractive for Canadians.

Even if you don’t do any cross-border shopping, you could still end up paying for a lower loonie. Here’s why: a lower loonie makes it more expensive for Canadian businesses to import goods from the U.S. Businesses are likely to increase their prices to make up for the lower Canadian dollar. We could see higher prices at everywhere from the supermarket to big box retailers.

Sean Cooper is a pension analyst by day and financial journalist by night, living in Toronto, Ontario. He is a first-time homebuyer and landlord who aspires to be mortgage-free by age 31. Follow him on Twitter @SeanCooperWrite and read his blogs and request his writing services on his personal website.